When the amount of funds which fiscal officials handled was small, the method in which they were administered was of little concern to others than the officials. As the amount of funds began to increase with the gradual extension of government activity, it became quite possible that the method of handling the funds would be of interest to others than the officials into whose hands the funds were placed.

Adam Smith's axiom that taxes should be paid at a time when it was most convenient is worthy of consideration. In the supply of capital there are seasons of scarcity and seasons of plenty. It is indicative of poor judgment on the part of the fiscal officials, if the collection of revenue is so arranged that the time for its payment comes when the contributor is least able to meet it - that is, at the season when money is already scarce. If such an arrangement exists, it will mean a still greater strain upon bank reserves than what would nominally occur, with a corresponding raise in the discount rate. If, on the other hand, fiscal officials so arrange that substantial payments by the government are made at times when money is already plentiful, the difficulties of a cheap money are increased by such action. In the formulation of fiscal plans, moreover, the possible effects on individual industries have not always been given due consideration.

Many illustrations of these difficulties have occurred in the revenues and expenditures of various political units. One of the outstanding examples, however, has been in the fiscal machinery of the Federal government. In the establishment of the first and second United States banks consideration was given to their ability to aid individual enterprise. President Jackson went to the extreme in using the government funds for the aid of general industry when he distributed them among the banks of his choice. The resulting speculation, followed by the panic of 1837, led to the adoption of the independent treasury system. The system was not put into actual operation until 1847, and has since remained in some form.

The Independent Treasury. - The original intention of the plan of the independent treasury was to keep all the funds of the government in this treasury or the sub-treasuries for which provision was made. The chief difficulty with this arrangement was that large sums of capital, which might otherwise have been used as the basis for bank credit, or for productive enterprise, were held in the vaults of the government until they were needed to meet some obligation. These payments were of course at irregular intervals, and frequently had a noticeable effect on the money market. After some years the Secretary of the Treasury was authorized to make deposits, under certain conditions, with national banks. Such deposits were made at the discretion of the Secretary, and the opinions of all Secretaries were not the same, nor could a definite policy of any particular one be relied upon.

The result has been an element of uncertainty in the banking system and in the money market. It could not be foreseen just what policy would be followed by the

Secretary of the Treasury. Banks did not know whether to anticipate deposits or withdrawals. There was no law which regulated these activities, and the practice was so diverse that no definite action could be anticipated. As there has been no uniformity in the receipts and disbursements of the government from year to year, or from month to month, so there has always been more or less uncertainty as to how banks and other industries would be affected by these variations in the operation of the treasury. The result has been a constant speculation among banks as to what the action of the Secretary of the Treasury would be. The Secretary has been in no way connected with the banks or other industries, yet has had control over a factor which vitally affected their welfare - a situation under which it has been impossible to expect satisfactory cooperation. The independent treasury system still exists, but it has sunk into insignificance to such an extent since the adoption of the Federal Reserve Banking System that its influence is scarcely felt.